NEW YORK (
shares continued to rally on Friday, building on Thursday's big gains and setting a new high since the lender emerged from a speedy Chapter 11 reorganization.
The stock was recently up nearly 4% to $36.25. Its peak for the session is $36.56. Volume of 3.6 million was already above the issue's trailing three-month daily average of $3.4 million.
The reason for the run-up was not immediately apparent.
's Matt Nesto mentioned rumors that CIT could be taken private by private equity investor Wilbur Ross, but did not appear to put much faith behind this information. One of the savviest executives I know about the type of lending CIT does, who works at a competitor, told me he had not heard the rumor and thought taking the company private would be difficult.
The reason for the difficulty, he explained, is that a big part of CIT's stated strategy involves doing more lending out of its Utah bank, which is currently under a cease-and-desist order from the
Federal Deposit Insurance Corporation
. Getting the FDIC comfortable with CIT's plan under new boss John Thain will presumably be difficult enough. Adding privatization to the mix would further complicate the situation.
That said, there are reasons to like CIT. The shortage of lending going on right now means margins are unusually attractive, and, having cleaned up its balance sheet, CIT is in a better position than many of its competitors to put capital to work. It still presumably has a lot of the needed relationships and infrastructure to start lending profitably again.
Another reason for bullishness comes from
The Baupost Group
, a blue chip hedge fund that, as a big lender to CIT, took a big stake in the reorganized company, according to a
. Carl Icahn also came out of the reorganization with a big CIT stake.
CIT is also in the market seeking to raise roughly $667 million via the asset-backed bond market, according to a
Dow Jones Newswires
The market of those securities is surely helping investors get reacquainted with CIT, as is research from Sterne Agee analyst Henry Coffey, who initiated coverage of the stock with a buy rating and a $40 price target on Monday.
The CIT momentum is also part of a sector-wide phenomenon. Other specialty lenders like
Allied Capital Corp.
have all touched new 52-week highs in recent weeks despite weakness in big banks like
Bank of America
Written by Dan Freed in New York